Airbnb IPO: How 7 Venture Capitalists Missed Out

Today I’m going to tell you a remarkable story about this red-hot tech company. Plus, how seven of the smartest venture capitalists missed the boat on the Airbnb IPO.

I first learned about the company in 2012, when it was just 4 years old. My wife and I were planning to move to Amsterdam for six weeks with our family, and we were looking for an apartment to rent in the Jordaan neighborhood.

At first, I started Googling apartment rental agencies. But I soon recalled a story about a startup that was creating a marketplace for apartment rentals. Its focus was short-term rentals of condos and apartments in cities around the world.

That startup company was Airbnb. And by using Airbnb, we found a two-story, family-friendly apartment overlooking the canals of Amsterdam. Our trip was an amazing experience for my family, and one that would have been challenging to make without using Airbnb.

Today, Airbnb’s success looks to be a certainty. With 1.2 million listings in 34,000 cities, the company has served more than 35 million people.

That success has attracted lots of attention from investors. In total, the company has raised $2.3 billion from some of the best and brightest investors in the world. Today, Airbnb is valued at an astounding $25.5 billion. When the Airbnb IPO happens, I expect the value will be even higher.

According to The Wall Street Journal, that makes Airbnb the third most valuable private tech company. The company is in a select group of just 100 pre-IPO companies that are each valued at more than $1 billion.

Airbnb commands nearly the same value as Hilton Worldwide Holdings (NYSE: HLT), which was founded in 1919 and operates 4,350 hotels with 720,000 rooms. And Airbnb is four times more valuable than Hyatt Hotels (NYSE: H).

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He was seeking a $150,000 investment. In exchange, he was offering investors a 10% equity stake in the company. All seven firms passed on the deal. Two were so disinterested that they didn’t even reply to his inquiry.

Finally, Airbnb raised $20,000 from a small incubator called Y Combinator. And this was soon followed by a large investment from a premier venture capital firm called Sequoia Capital. Today, a 10% stake in Airbnb would be worth $2.5 billion … making this a huge blunder for the VCs that passed on the deal.

But that’s not stopping the company from attracting more capital. In late June, huge investment firms including Fidelity Investments, T. Rowe Price (NASDAQ: TROW) and Wellington Management invested $1.5 billion in the company.

The Airbnb IPO will happen later this year or perhaps in 2016. By the time that happens, venture capitalists, billionaire investors and the top hedge funds will have already made the biggest profits. That’s because they staked their claim on Airbnb before the IPO.

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